HOAleader.com - Tip of the Week - November 26, 2010
Published: Mon, 11/15/10
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Is There Such a Thing as a Homeowners Association with Too Many
Bank Accounts?
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This week's tip is a primer on recognizing when your HOA has gone
overboard in creating new--and unnecessary--bank accounts.
How many bank accounts should your association have? "It
depends," says Robert White, managing director of KW Property
Management & Consulting in Miami, which oversees about 125
associations totaling 30,000-35,000 units. "Each association is
different."
Most associations need an operating account and an account
for your reserves. "You shouldn't be comingling your operating
and reserves," says White. "And if you have a special assessment,
you should have an account for that."
Beyond those accounts, additional ones are rare. "I can't
think of another reason to have more accounts unless your funds
exceed the FDIC limits," says White, referring to Federal Deposit
Insurance Corp. limits of $250,000 per depositor per insured bank.
"You might also want a separate account if you were doing real
low-risk type of investment. For example, some associations have $
1 million, $2 million, or $3 million in reserves. If it's just
sitting in a dead account and you know it's not going to be
needed any time in the near future, you could put it in a
certificate of deposit or another type of low-risk account."
Both White and Rosenbeck agree that it may be wise to have a
separate account for a special assessment. "Maybe you want to do
a special assessment for specific issue," says Rosenbeck. "You
might want to create a separate account for that so you can make
that accounting easier.
"But you don't always need a special account for a special
assessment," adds Rosenbeck. "It depends on what the money's
assessed for. If it's for operating funds, you probably don't
need a separate account. But if it's for a new pool, you should
probably have a separate account because you'll need to know what
to do with the excess funds. Do you put them in your general fund,
reserves, or refund them to members? The answer might be covered
in your governing documents or in the language of the special
assessment. You might say that owners are approving the special
assessment for this purpose, but if that project comes in under
budget, the association can use the excess funds for operating or
reserves at the discretion of the board."
For details on the risks of having too many bank accounts
and who should have access to your association's bank accounts,
see our new article, http://www.hoaleader.com/members/510.cfm.
Best regards,
Matt Humphrey
President
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